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Healthcare Heads > Reimbursement > In-patient sector > Applications > DRG proposal

Proposal Process for Diagnosis Related Groups (DRG)

We support you in the preparation and submission of proposals for the further development of the G-DRG-system. Healthcare Heads generated a standardized process to prepare DRG proposals in due time, cost-efficient and in high quality. 

The German DRG-system (G-DRG-system) is used as part of the dual hospital funding system in Germany for the remuneration of the operating costs of all in-patient treatment cases. The G-DRG-system was introduced in Germany in 2004 based on the Australian DRG system.

DRG-systems are not designed as remuneration systems. They are classification systems which enable the measurement of the economic resource consumption of individual patients and patient groups based on medical performance identifiers and therefore comparing the different hospitals’ services and treatments based on these data.

The fact that a classification system was used to refinance hospital operating costs as part of the hospital funding has repeatedly drawn criticism for the political decision-makers in Germany over the last years. Two measures were taken to use the system for political control and the realization of  regulating adaptations   to the DRG system: On the one hand, the DRG Institute (“Institut für das Entgeltsystem im Krankenhaus GmbH” (InEK)) was assigned with the maintenance as well as an annual adjustment and further development of the G-DRG-system based on performance and costing data of German hospitals. On the other hand, a so-called "structured dialogue for the integration of the medical, scientific and other expertise in the further development of the G-DRG-system" (short: DRG proposal process) was implemented. With this proposal process, all applicants have the opportunity to influence the further development of the G-DRG-system and thus on the Reimbursement of therapies and products.

As a result of both, InEK has carried out thousands of simulation calculations every year since the introduction in 2003 and 2004 to improve the G-DRG-system. This resulted in numerous adjustments to the allocation of cases to the individual DRGs, the DRG algorithm. Thus, the G-DRG-system has become more and more suitable for hospital funding in the last years.

Furthermore, the basic conditions which are not part of the G-DRG-system and used by politics to additionally regulate the market should not be underestimated. As an example, hospitals cannot treat as many patients as they want, since the volume must be negotiated with the payers first. Also, authorised performance increases are punished by Reimbursement reductions. In addition, hospitals may only provide services as included in the hospital planning and agreed with the payer - these are only some of the additional restrictions.

The medical industry is eligible to participate in the so-called DRG proposal process. This will enable medical device companies to ensure that the G-DRG-­­­­­­­system provides appropriate Reimbursement for the therapies performed with their products.

For a proposal for the further development of the G-DRG-system to be taken into account and implemented in InEK, numerous criteria must to be considered: Apart from the submission of a proposal in due time by an eligible institution, various requirements regarding wording and content are to be met. If these requirements are met and if InEK is able to reproduce the described problem in the present data basis, the proposal is considered and implemented in the further development of the G-DRG-system.

At InEK, all proposals for the further development which must have been submitted by the end of March (end of February) are translated into simulation calculations. During the so-called calculation phase, it is therefore tested on the basis of the available data at InEK, whether the implementation of a corresponding proposal would lead to an improvement of the representation of the relevant therapy in the G-DRG-system.

This means that the treatment costs are the main decision criterion for the mapping of cases to a certain DRG. It seems important to point out that evidence and/or clinical effectiveness or safety have no relevance for the evaluation at InEK in the context of any further development so far.

If a change in the G-DRG-system, detected in a simulation calculation, leads to an improvement, an appropriate DRG proposal is implemented into the G-DRG-system. This leads – via the allocation of the cases to a DRG or a supplemental fee – to a changed Reimbursement.

The data used by the InEK for the simulation calculations of the proposals originate from the German hospitals. All German hospitals provide InEK with performance data (e.g. OPS-codes, ICD-10-GM codes and others) of the previous year for the development of the G-DRG-system in the subsequent years. In addition, approx. 300 so-called InEK reference hospitals provide InEK with very differentiated costing data for each individual treatment case. It should be noted that the accuracy with which the InEK reference hospitals can allocate the costs of the individual cases to the various cost centres and cost types, significantly determines the quality of the G-DRG-system.

For the medical industry, this process has several consequences:

  • The medical industry should be an active part in the further development of the Reimbursement system. Apart from participating in the DRG proposal process via eligible institutions (for example, medical societies, hospitals, BVMed, etc.), the early implementation of a preferably specific OPS-code is essential (read more about OPS-codes and their proposal process here).
  • Timing CE mark and the different proposal processes: 

Almost 90% of the population in Germany are insured via statutory health insurances which are subject to guidelines defining which medical services and treatments are reimbursed and their designated amounts. The economic success of a medical device company on the German healthcare market depends substantially on the Reimbursement of the products and therapies via the statutory health insurance.

Due to the structured further development process of the G-DRG-system as well as the need for preferably specific encoding (e. g. via specific OPS-codes, which have to be requested [Link]), a Market Access strategy should be implemented prior to the market entry and also prior the assignment of a CE-mark. This should also include the further development of the G-DRG-system, data generation, proposal process, etc.

  • Selection of the hospital partners

The further development of the G-DRG-system is based on the performance and costing data of the German hospitals.

Therefore, the costing data of approx. 300 InEK reference hospitals are provided. Without these specific costing data, no specific further development of the Reimbursement system can take place. It is therefore of particular importance to analyse which therapies are performed in the different German hospital. To this effect, the selection of the correct hospitals, i.e. as a partner in the context of the Market Access strategy, is crucial for the success of the Market Access strategy and, above all, to market adoption speed.

  • Prices and pricing models

The costs of the therapies performed in the InEK reference hospitals are crucial factors in the calculation of the DRGs and, thus, the therapy Reimbursement. As a result, prices and pricing models defined by the medical industry in the different hospitals are of central strategic importance - also in terms of Reimbursement. Prices and pricing models need to be thoroughly considered, especially regarding the Reimbursement in the context of the G-DRG-system.

  • Prices and pricing models

The costs of the therapies performed in the InEK reference hospitals are crucial factors in the calculation of the DRGs and, thus, the therapy Reimbursement. As a result, prices and pricing models defined by the medical industry in the different hospitals are of central strategic importance - also in terms of Reimbursement. Prices and pricing models need to be thoroughly considered, especially regarding the Reimbursement in the context of the G-DRG-system.

  • Cost calculation and internal service and cost allocation

In the final step – at least for InEK reference hospitals – hospitals must be able to merge the different cost and performance information. That is not a matter of course and a process that affects numerous groups of persons in the German hospitals who do not automatically have good communication with one another. In addition, the controlling and purchasing department of the hospitals must evaluate a variety of therapies and products. In consequence, hospitals are usually very grateful when receiving support - also from the medical industry - for this service.

The previous passages stated that the timing for the DRG proposal process and the Market Access is important and that specific OPS-codes are available and/or need to be prepared. The selection of appropriate hospitals and the correct price is also essential.

As a result, the timely planning and preparation of a DRG proposal has a very central and particular importance in the context of a Market Access strategy and can determine its success and failure.

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